BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 2868 Hearing Date: 6/27/2016
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|Author: |Gatto |
|-----------+-----------------------------------------------------|
|Version: |6/15/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Energy storage
DIGEST: This bill requires investor-owned utilities (IOUs) to
file applications with the California Public Utilities
Commission (CPUC) for programs and investments to accelerate
widespread deployment of distributed energy storage systems.
ANALYSIS:
Existing law:
1)Requires the CPUC to determine appropriate targets, if any,
for load-serving entities (LSEs) to procure energy storage
systems. Requires LSEs to meet any targets adopted by the
CPUC by 2015 and 2020. Requires publicly owned utilities
(POUs) to set their own targets for the procurement of energy
storage and then meet those targets by 2016 and 2021. (Public
Utilities Code §2835 et seq.)
2)Directs the California Energy Commission (CEC) and the CPUC,
where feasible, to authorize procurement of resources to
provide grid reliability services that minimize reliance on
system power and fossil fuel resources and, where feasible,
cost effective, and consistent with other state policy
objectives, increase the use of large- and small-scale energy
storage. (Public Utilities Code §400)
3)Authorizes, beginning January 1, 2018, the CPUC to require or
authorize an IOU to employ default time-of-use (TOU) pricing
for residential customers. (Public Utilities Code §745)
AB 2868 (Gatto) PageB of?
This bill:
1)Directs the CPUC, in consultation with the California Air
Resources Board (ARB) and the CEC, to direct IOUs to file
applications for programs and investments to accelerate
widespread deployment of distributed energy storage systems to
achieve ratepayer benefits, reduce dependence on petroleum,
meet air quality standards, and reduce emissions of greenhouse
gases.
2)Requires the CPUC to approve, or modify and approve, programs
and investments in distributed energy storage systems with
appropriate energy storage management systems and reasonable
mechanisms for cost recovery from all distribution customers
for distribution level distributed energy storage systems, and
from transmission customers for transmission level distributed
energy storage systems, if they are consistent with the
section and are in the interest of the ratepayers.
3)Requires the CPUC to first approve programs and investments
that provide distributed energy storage systems to industrial,
commercial, and low-income customers.
4)Authorizes the CPUC, beginning January 1, 2019, to approve
programs and investments offered to residential customers who
enroll in TOU pricing.
5)Defines "distributed energy storage system" as an energy
storage system with a useful life of at least 10 years that is
located on the customer side of the meter.
6)Defines "energy storage management system" as a system by
which an IOU can manage the charging and discharging of the
distributed energy storage system in a manner that provides
benefits to ratepayers.
7)Sunsets all of the above provisions as of January 1, 2020.
Background
State encourages procurement of energy storage. As the state
becomes increasingly reliant on intermittent renewable energy
resources, it will need options to allow it to flexibly manage
electric supply and demand. Energy storage is one technology
that allows for such flexible management.
AB 2868 (Gatto) PageC of?
Existing state programs seek to foster development and
deployment of energy storage systems. Statute requires the CPUC
to determine appropriate targets, if any, for LSEs to procure
energy storage systems by 2015 and 2020, and directed POUs to
set their own comparable energy storage system procurement
targets.<1> The CPUC, in implementing AB 2514, established the
following energy storage system procurement targets applicable
to the state's three largest electric IOUs<2>:
--------------------------------------------------------------
| |
--------------------------------------------------------------
|-----------------------------------+----+----+----+----+-----|
|Energy Storage Procurement Targets |2014|2016|2018|2020|Total|
| | | | | | |
|-----------------------------------+----+----+----+----+-----|
|Southern California Edison (SCE) | | | | | |
|-----------------------------------+----+----+----+----+-----|
|Transmission | 50| 65| 85| 110| 310|
|-----------------------------------+----+----+----+----+-----|
|Distribution | 30| 40| 50| 65| 185|
|-----------------------------------+----+----+----+----+-----|
|Customer | 10| 15| 25| 35| 85|
|-----------------------------------+----+----+----+----+-----|
|Subtotal SCE | 90| 120| 160| 210| 580|
|-----------------------------------+----+----+----+----+-----|
|Pacific Gas and Electric (PG&E) | | | | | |
|-----------------------------------+----+----+----+----+-----|
|Transmission | 50| 65| 85| 110| 310|
|-----------------------------------+----+----+----+----+-----|
|Distribution | 30| 40| 50| 65| 185|
|-----------------------------------+----+----+----+----+-----|
|Customer | 10| 15| 25| 35| 85|
|-----------------------------------+----+----+----+----+-----|
|Subtotal PG&E | 90| 120| 160| 210| 580|
|-----------------------------------+----+----+----+----+-----|
|San Diego Gas and Electric (SDG&E) | | | | | |
|-----------------------------------+----+----+----+----+-----|
|Transmission | 10| 15| 22| 33| 80|
|-----------------------------------+----+----+----+----+-----|
|Distribution | 7| 10| 15| 23| 55|
|-----------------------------------+----+----+----+----+-----|
---------------------------
<1> Chapter 469, Statutes of 2010 (AB 2514, Skinner).
<2> See CPUC Decision 13-10-040.
AB 2868 (Gatto) PageD of?
|Customer | 3| 5| 8| 14| 30|
|-----------------------------------+----+----+----+----+-----|
|Subtotal SDG&E | 20| 30| 45| 70| 165|
|-----------------------------------+----+----+----+----+-----|
|Total IOU Energy Storage | 200| 270| 365| 490|1325 |
|Procurement Targets | | | | | |
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The CPUC reports the IOUs have each progressed in meeting their
energy storage procurement goals. However, none has yet met its
final procurement goal in any category, other than SCE, which
has already exceeded the procurement goal for customer-side
storage several times over.
The state has also provided financial incentives to energy
storage systems. Over the last several years, the CPUC reports
that the Self-Generation Incentive Program (SGIP), which the
CPUC administers, has awarded $42 million to nearly 1,200 energy
storage projects.
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|SGIP Awards to Energy Storage Systems |
| |
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|---------+------+------------+----------+------------+-------------|
| Years |Projec| Installed |Incentive | Reserved | Incentives |
|2009-2015| ts | Capacity | Paid | Capacity | Reserved |
| | | (kW) | | (kW) | |
|---------+------+------------+----------+------------+-------------|
| Totals| 1175| |$41,547,42| | |
| | | | 6 | |$149,215,781 |
| | | | | | |
| | | 23 | | 92 | |
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The CPUC is currently considering revisions to SGIP program
eligibility. While the CPUC has yet to make a decision about
program revisions, a staff proposal recommends reserving at
least 75 percent of future program awards for energy storage
systems. A primary rationale for this storage-focus is the CPUC
staff's belief that the energy storage industry is ripe for
market transformation, so that system subsidies have the
potential or even the likelihood to lead to decreases in energy
storage system costs.
AB 2868 (Gatto) PageE of?
Time-of-use rates. TOU rates are a mechanism to shape demand
for energy. TOU rates rely on price signals to encourage
customers to reduce their use of electricity when the relative
availability of electricity is low or, in some cases, to
increase their electricity use when relative supply is abundant.
Currently, the CPUC requires all commercial and industrial
customers of the IOUs to participate in TOU rates. Statute
authorizes the CPUC to allow or require IOUs to offer TOU rates
to residential customers beginning in 2018. The CPUC has
recently required the IOUs to offer mandatory TOU rates to
residential customers beginning in 2019, with the option for the
customer to opt out of such rates at his or her request.
The use of energy storage systems has the potential to
complement TOU rates. This is because the operator of an energy
storage system of a customer on TOU rates could charge the
storage system when electricity rates are low (signaling
abundance) and discharge the storage system when electricity
rates are high (signaling scarcity).
Focus on customer-side energy storage meant to ensure storage
systems benefit customers directly. This bill limits the energy
storage programs and investments the IOUs are to propose to only
systems located on the customer side of the electricity meter.
The limitation prevents the IOUs from proposing programs and
investments in energy storage systems to be installed on
electricity transmission or distribution systems. This is by
design. The author reports that he intends the IOUs' programs
and investments to benefit IOU customers as a whole and
individual customers specifically; the best way to ensure
individual customers benefit from the IOU programs and
investments is to limit them to the customer side of the meter.
Arguably, individual customers can benefit from energy storage
systems located at the transmission level, the distribution
level and behind the customer meter. The author's intent seems
to be to encourage deployment of systems that provide direct
benefits - meaning lower electric utility bills - to the
customer. Energy storage systems on the customer side of the
meter can lower a customer's electric utility bill.
Short timeframe intended to spur fast action on energy storage.
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The author intends to encourage rapid deployment of energy
storage technologies. For this reason, this bill sunsets on
January 1, 2020. The author views the short duration of the
program and encouraging quick action. However, action at the
CPUC is rarely quick. Its proceedings to implement bills can
take years. In any case, the Legislature can always extend the
program sunset at a later date if becomes practically necessary.
Bill's prescriptions could benefit from flexibility. Despite
the state's efforts described above, or perhaps in conjunction
with them, the author intends this bill spur deployment of
energy storage systems. Some parties are of the view that the
bill is necessary and may create additional costs for
ratepayers. The Utility Reform Network, for example, notes the
current high cost of energy storage as well as the state's other
efforts to promote energy storage deployment and use.
To better ensure the programs and investments required by this
bill do complement the state's existing efforts to foster the
energy storage deployment and use, the author may wish to add
some flexibility to the bill's requirements. First, the author
may wish to provide the CPUC flexibility in adopting the energy
storage programs and incentives proposed by the IOUs. It could
be that the proposals of an IOU are helplessly inadequate or
unnecessary in light of developments in the coming years.
However unlikely that outcome, the author may wish to amend this
bill as shown below.
As described, this bill directs the IOUs to propose programs and
investments to accelerate widespread deployment of distributed
energy storage systems. Such systems, as defined by this bill,
are on the customer side of the meter. Some, such as California
Solar Energy Industries Association (CALSEIA)<3>, express
concern that this requirement could lead the IOUs into
competition with unregulated nonutility third parties, who do
not share many of benefits of a regulated utility, such as a
guaranteed rate of return. These parties note that there is a
robust, competitive energy storage marketplace in California.
To ensure the CPUC authorizes IOU investments and ownership of
customer-side energy storage systems only when market conditions
justify it, the author may wish to amend this bill as shown
below:
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<3> California Solar Energy Industries Association.
AB 2868 (Gatto) PageG of?
Public Utilities Code §2838.2
(c) (1) The commission shall may approve, or modify and
approve, programs and investments in distributed energy
storage systems with appropriate energy storage management
systems and reasonable mechanisms for cost recovery from
all distribution customers for distribution level
distributed energy storage systems, and from transmission
customers for transmission level distributed energy storage
systems, if they are consistent with the section , do not
compete unfairly with nonutility enterprises, and are in
the interest of the ratepayers.
Prior/Related Legislation
AB 2514 (Skinner, Chapter 469, Statutes of 2010) required CPUC
to determine appropriate targets, if any, for LSEs to procure
energy storage systems. The bill required LSEs to meet any
targets adopted by the CPUC by 2015 and 2020. The bill required
POUs to set their own targets for the procurement of energy
storage and then meet those targets by 2016 and 2021.
AB 33 (Quirk, 2015) reiterates existing law, which states that
new pumped hydroelectric storage facilitates eligible for any
increased energy storage system targets adopted by the CPUC.
The bill passed this committee 11-0 and is pending before the
Senate Committee on Appropriations.
SB 886 (Pavley, 2015) would require appropriate energy storage
system procurement targets; requires each load-serving entity
and locally owned public electric utility to plan for the
procurement of energy storage systems before fossil-fuel-based
generation; and requires each electrical corporation to propose
measures to encourage customers to install energy storage
systems. The bill passed the Senate 25-14 and is pending action
in the Assembly Committee on Utilities and Commerce.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SUPPORT:
Association of California Water Agencies
California Energy Storage Alliance
California Solar Energy Industries Association, if amended
AB 2868 (Gatto) PageH of?
California State Association of Electrical Workers
Coalition of California Utility Employees
San Diego County Water Authority, if amended
Solar Energy Industries Association, if amended
SolarCity, if amended
TechNet, if amended
OPPOSITION:
Marin Clean Energy, unless amended
San Francisco Public Utilities Commission
Sonoma Clean Power, unless amended
The Utility Reform Network
ARGUMENTS IN SUPPORT: According to the author:
This bill requires the CPUC, in consultation with the State
Air Resources Board and the State Energy Resources
Conservation and Development Commission, to direct electric
corporations to file applications for programs and
investments to accelerate widespread deployment of
distributed energy storage systems.
Energy storage systems will help customers manage energy
costs and improve electrical grid reliability by reducing
overall system peak energy demands. Increased demand for
energy storage technologies will drive new business
opportunities and will help keep and create manufacturing
and industrial jobs in California. Energy storage also
offers valuable benefits to public and environmental health
by assisting California achieve its greenhouse gas
emissions goals.
ARGUMENTS IN OPPOSITION: Representatives of community choice
aggregators (CCAs), such as Marin Clean Energy, contend this
bill will require the CPUC to assign costs for the customer-side
energy storage programs and investments required by this bill to
all transmission and distribution customers, CCA customers
included, though they receive no benefit from the program or
investments.
AB 2868 (Gatto) PageI of?
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